The Chicks' 12 Steps to Picking a Stock

STEP 2  K.I.S.S. (Keep It Simple, Sister)

Note: This article focuses on Step 2 of the Chicks' Dozen. For articles focusing on other Steps, see the links listed at the bottom of the page.

If there is any one principle that typifies the Chick philosophy, this one is it: Keep It Simple Sistah! Actually it should read, Keep it Simple and Have Fun, but the acronym KISAHF... well, "Kiss Off" just doesn’t work as well. Back in acting class, KISS was our credo as well, only in typical Hollywood fashion it stood for Keep It Simple Stupid! No wonder actors are so insecure! Ah, another great reason to be a chick -- we’re just so nice. In this time of constantly feeling overwhelmed as we women continue to juggle more and more in our lives, I think we can happily embrace any principle that tells us to simplify.

Now, when you have a certain stock that you’re bringing through the Chicks Dozen, we want you to have a good understanding as to what it is the company does. Only by understanding what it is they do, can you begin to understand whether or not you think they do it well and whether they will continue to do so. Two resources I use when having some trouble on my own are, The Fool.com’s Company Snapshot and MSN.com’s Company Report. Both give you a nice little summary. You can also use our Chicks' Dozen Worksheet to see how a company stands up to the criteria of the Chicks' Dozen.

To ensure simplicity we have adopted stock market guru, Peter Lynch’s, approach. We love it 'cuz its just so darn Chicky! Ask yourself two questions: One, can you draw it with a crayon? And two, can you explain it to a fifth grader? And in that explanation, make sure to say it plainly enough so he’ll understand and say it quick enough so he won’t get bored. Obviously, drawing a picture of a giraffe named Geoffrey will lead any fifth grader to Toys R Us (NYSE: TOY).

Other stocks, however, may be a bit more troublesome. Don’t buy ‘em! I’m kidding. Unfortunately, many of those stocks cannot be ignored. If you’ve paid attention to the news at all in the last year, you’re aware of the boom in the technology industry. Of course, you’re aware, you’re on the net! You’ve already experienced how much technology is changing our lives and at what a pace. There are some very good, solid companies to be found in the tech industry (and many more to stay away from). You just need to learn how to break down what it is they do into understandable terms. Like all these principles, it just takes practice.

Some companies are easier than others. Take E-Bay (Nasdaq: EBAY), easily described as an online garage sale of buying and selling, as simple to use as point and click. Cisco Systems (Nasdaq: CSCO in our Chick Portfolio, by the way) may require a bit more thought and research. Basically, Cisco gets the whole internet hopping. They make the products (routers and switches, among other things) that power the net and allow computers to talk over time and space. They make the building blocks. Heck, even a two year old can understand that! How about EMC (NYSE: EMC)? Chick Susie, in a recent report, told us to think of EMC as the Internet’s closet. Imagine how much storage the internet needs! (And I thought I had a clutter problem!) No wonder that stock has done so well of late.

After awhil, it becomes kind of a game. Let’s try UPS (NYSE: UPS). Big brown trucks, men with great legs and packages at your doorstep! (Oops, sorry, there are women drivers too!) Ya see? I bet you never thought KISS-ing stocks could be so much fun! Granted, we want you to take your investing seriously, but we Chicks are big on entertaining ourselves at the same time. The bottom line is, you can do this, Chicky. Unlike Wall Street, who wants to make everything seem so hard, we just want you to Keep It Simple, Sweetie.